Alleviating Poverty 55
features of the program, with the vast bulk going to pay current retirees’ benefits, as well as to fund the operations of the Federal government. In return for paying F.1.C.A. taxes, employees are promised that, when they retire— and until they die— they will receive government benefits based on their earnings during their years of employment.
There are at least two common misperceptions about Social Security. One is that the retirement benefit that forms the cornerstone of the program is actually“insurance.” If it were in fact insurance in the classic sense, it is not at all clear what this“retirement insurance” might be insuring against. If it is insuring against outliving one’s finances, then Social Security would have to be considered a rather limited type of insurance policy, given that it can meet, on average, only forty percent of the needs of those who outlive their finances. Furthermore, if it is indeed insurance against outliving finances, then there is clearly a significant minority of American retirees who ought not to have any“claim” whatsoever since there exists no plausible prospect of them ever outliving their finances. For wealthy Americans , if the insurance model were the apt analogy, then, in the event of some catastrophic occurrence that eliminated financial wellbeing, Social Security benefits could— like other insurance payouts— begin at the point of crisis, rather than starting at an arbitrarily designated age. This is not, however, the way in which the system works, and hence its standing as an“insurance” program, as opposed to a“welfare” program, is debatable.
The second, far more widespread, misconception about Social Security is that the program simply returns to the beneficiary the monies that were“paid in during all those years,” along with the accrued sums yielded from the investment of those monies. This view perceives the government essentially managing a citizen’s retirement money on behalf of the individual and then returning it to each